CHAPTER ONE:
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The amount of the producer’s wealth is a
guess depending on price, method, and level of out put and peace of production.
Nigeria is an Oil producing nation, and oil occupies a very important position
among the nation’s revenue sources. Its significance in the nation’s economy
cannot be explained solely in terms of barrels produced and sold.
Other important variables such as the
dynamics of international energy marketers the role of organization of
petroleum exporting countries (OPEC) the political realities. With the very strategic position oil revenue
occupies in the Nigerian economy, accounting for over three quarters of
government revenue from all sources, Nigeria has always dreaded unfavourable
changes from oil prices in general and from OPEC’s holds the you and the knife.
This phenomenon has earned the popular saying that “when OPEC’s oil polices in
particular as these changes severely and jointly effects our national
development process, OPEC determines the number of barrels of oil to be
produced and sold per day by any member country. In this pragmatic position.
OPEC holds the yam and the knife. He determines whatever portion any members nations
eats. This phenomenon has earned the popular saying that when OPEC sneezed,
member nation economy cried out”
Presently, revenue from oil is trying to wake
up from a deep slumber it fell into so many years now. With the current OPEC
production, export volume, domestic consumption level, Nigeria expects a
brighter future and has based the budgets on the proceeds. these show not only
Nigerian economy on oil revenue for instance the majority of the estimated
federally collectable revenue comes from oil source while non-oil source are
expected to yield a minority of total estimated revenue.
At the time ol was discovered in commercial
quantity in Nigeria in 1956 up to the time production and exploration took
place in 1958, the country had relied on imported petroleum products to meet
its domestic requirements. As oil had not started to occupy the commanding
height of the national economy, exploration and production were in the hands of
a British company (shell D’AVCY 9 Shell BP). The emphasis of the government
dividing this period was to provide a roper advisory an regulatory body to
supervise the activities of the foreign oil companies. This company shall
D’AVCY (now shall BP) continued as the sole concessionaire in Nigeria until
1959 when exclusive exploration right become available to companies of other
nationalities . in 1961, other companies Gulf, Agip, Safrep (Now EIF) Tennesco
and Amoseas (now Texaca Nig. Ltd0 Mobile, AP etc, started jointly the explorers
for oil in the on share areas on Nigeria.
As the years went by, petroleum policy was
geared towards direct and active participation in the three phases of the
industry, namely, exploration and drilling, refining,. Distribution and
marketing. Hence after reacting a production level of 1.531 mbd in 1973
representing about 31 of total world oil production and the establishing
herself as an oil province, Nigeria
joined the organization of petroleum exporting countries (OPEC). With the
Nigerian enterprises promotion decree 1977, this figure had gone up to about 60
in some of the oil companies. Similarly the Nigerian national oil corporation
(Nnod was established in 1971 to give effect to direct exploitation of the
countries strategic resources.
1.2 STATEMENT OF PROBLEM
Oil is a commodity like no other; it is a
prime source of energy that cannot be quickly replaced. Its production is held
in few hands. Its producers can chosen at the turn of value either to increase
its flower to reserve it in the ground. In the further, in it stores value of
1.291 mbd and atterage domestic consumption of 3000,00mbd. Since the oil boom,
one would expect a reasonable level in growth, development and industrial
listen but evidence has provided otherwise.
Although Nigerian oil industry has contributed
largely to the growth effort in the country and has provided enhanced revenue
to the government especially during the oil boom 1970’s the full benefits of
the industry have been realized. Indeed. Nigeria’s oil industry has operated
with minimum linkage. Indeed, Nigeria oil industry has operated with minimum
linkage with the ret of the economy. For instances for over thirty years of commercial discovery,
production and exploitation of crude oil, petroleum technology for your
industrialization and development will our oil revenue has been virtually
impossible. The bulk of our oil revenue is therefore spent on the importation
of various-consumer goods capital goods and other agriculture produce which
could be cultivated in Nigeria in reasonable quantity thus our hard-earned oil
revenue has only successes in keeping foreign farmers employed and in keeping
foreign industries working. In this manner the evidence of substantial growth
in the economy has either resulted neither into much development nor into
significant transformation of the economy.
The marketing and distribution of petroleum
products were entirely in the private hands. This lasted up to 1975 when the private companies cold no
longer meet the domestic demand for the product. This was as a result of the
expansion of economic activities and the unprecedented explosion in the demand
for the products owing to the quick recovery from there Nigeria civil war
(1967-1970).
Prior to this time, there was lack of
uniformity throughout the country in the price of petroleum products. The pump
price system, depending on the point of sale. The oil marketing companies
naturally concentrated heir lower and profit were highest. Lagos and
Port-Harcourt areas were well served while the hinterlands were process of
economic growth and development of all nations. Majority of people hold the
vent that oil has not played a crucial role in the process of economic growth
and development of Nigeria due to advance domestic bottlenecks of petroleum
product, lack of adequate road tempers and uneasy assess to spare parts.
Others on the other hands hold he view that
major constraints lie with the international bottlenecked. The shady oil deals
smuggling and bunkering, crude oil price glut and the Nigeria membership in
organization of petroleum Exporting Countries (OPEC).
1.3 OBJECTIVE OF THE STUDY
Having defined the problem of the project
study and concluded by brining our the overall aim of the research, it is
necessary at this juncture, to present the specific objectives which this work
intends to achieve.
1. To
examine the exact impacts of oil companies in the Nigerian economic development
process.
2. To
assess the extent to which they have achieve the roles.
3. To
examine he effect of the organization of petroleum exporting countries (OPEC)
on the price, demand and supply of the Nigeria crude oil.
4. To
examine the effects of the uniform pricing policy of the government on the
domestic consumption of petroleum products.
5. To
search for the problem that confront the expected role of oil industry as a
whole in the Nigeria economic development process, and give recommendations of
the acquirement of the required roles.
1.4 HYPOTHESIS
In other to carry out this study and in view
of the stated objectives of this work, there hypothesis have been formulated
they are:
Ho: The contribution of oil sectors in
Nigeria justifies the huge investments being committed to the sector by federal
government.
Hi: The contribution of oil sectors in
Nigeria justifies the huge investments being committed to the sector by federal
government.
Ho: The erratic nature of the world oil
prices has no influence on the trend of the Nigerian economic development
efforts.
Hi: The erratic nature of the world oil
prices has been a great influence on the trend of the Nigerian economic
development efforts.
Ho: Domestic consumers of petroleum petrol
diesel, kerosene, etc are not satisfied with the present level of distribution
of the products.
Hi: Domestic consumers of petroleum petrol
diesel, kerosene, etc are satisfied with the present level of distribution of
the products.
1.5 RESEARCH QUESTION
The following research questions were
formulated in the course of this research work.
1.
What are the roles of Oil Company’s ion the Nigerian economic
development process?
2. To
what extent have the companies achieve their impact in Nigerian development
goal.
3.
What are the effects of the organization of petroleum exporting
countries (OPEC) on the price, demand and supply of the Nigeria crude oil?
4.
What are the effects of the uniform pricing policy of the government on
the domestic consumptions of petroleum products?
5.
What are the problems that confront the expected role of oil industry as
a whole in the Nigeria economic development process, and give recommendations
of the acquirement of the required impacts?
1.6 SIGNIFICANCE OF THE STUDY
This work is significant in exposing the
intricacies in oil industry with the view to making strategic the position this
sector holds in Nigerian economy public the mina stay of the economy.
It will equally make laudable the need
diversify the Nigerian economy and pay attention to other revenue source
especially agriculture source is said that, two good heads are beer than one.
In the same avian, oil is never and will remember be the only source of energy
Nigeria is endowed abundantly with other energy source, namely coal, natural
gas and uranium.
Information and recommendation given in this
work will not only be useful to the oil companies in formatting better polices
to improve their distribution system but will also be useful to the government
in checking the undue excesses of hoarding, bunkering and smuggling of
petroleum products, and more importantly the dwindling of the crude oil prices.
Finally the result from this study will be
useful for further studies into this aspect of our economy especially the
inefficiencies associated with the oil industry arising from wide spread
stratagem, tendencies toward price increased or decrease with the attendant
social economic unrest.
1.7 SCOPE OF THE STUDY
Besides Lagos, Port-Harcourt and Warri in the
Southern part of Nigeria, this work also covers four states in the North. They
are Sokoto, Bornu, Kano and Kaduna. The financial constraints and time suffered
in transporting the researcher to those places were enormous. The
questionnaires for domestic purpose cover literate and illiterate consumer of
petroleum product. Some of their answers were biased but the biases were to
infinitesimal to affect the result of the findings.
On the part of the executives, some, felt to
big to give full information required where as some, due to the competitive
nature of the industry, were reluctant in releasing all the information needed.
Lastly but most importantly adjustment to a
change in the school system is not so easy. The semester system recently
introduced in the universities of Nigeria from the trimester system greatly
affected he amount of time spent and adjustment in certain areas especially
where lecturers had to be missed.
1.8 LIMITATION OF THE STUDY
This research work was however, hampered, by
the following unavoidable constraints.
1 Time: The battle of carrying out this
research with the semester academic work was enormous and tedious. The
researcher could only manage any available time at her disposal that would not
disturb her own academic works.
2
Resource Constraint: The
financial need of the research work is also enormous. The fact the researcher
is prone to only a paltry fixed a salary at the end of every month were daily
bread, is met has actually limited the research work because of the cost of
data collection.
3
Respondents: The information used was based on that provided by top
management staffs that are given as actual participants in the keeping and
disbursement of funds.